Thinking of taking Dave Ramsey UK Student Loan advice? Don't. It's wrong.
Dave Ramsey is incredible. He has been an incredible motivation in my career and to my own personal finances.
However, his student loan advice does not apply to those in the UK.
Let me explain why…
Dave Ramsey's principles apply to the majority of his audience. 95% of which are based out of the US.
For the majority of Dave's advice that's fine. The same principles (for example his baby steps) can be easily converted into advice for UK consumers of Dave's content.
However, the UK and US are very different when it comes to a student loan, and student loan debt.
How US Student Loans Work
In the US the majority of students have to take student loans from the bank instead of the government to finance both the courses and cost of living during the time in which they are a student.
Therefore this debt is held against them when they look to get further credit (for a house for example) and is considered as part of their personal debt.
It gains interest at a set rate (like a mortgage or loan) and will always need paying back.
Therefore, when people discuss their debt on the Dave Ramsey show that debt includes their student loan.
How UK Student Loans Work
In the UK we borrow money from the government-funded student loan system for both our courses and the cost of living during the time in which we are a student.
The loan is never shown on your credit file, it doesn't affect your credit rating and therefore the possibility of you getting a mortgage for example.
While the debt does gain some interest, the amount in which you pay back (as standard) towards your student loan is taken directly from your wage slip (just like your tax etc.) and is based on the amount you earn.
You can overpay on your student loan debt, but unlike in the US it's recommended you don't.
Because not only does that debt not impact your financial standing. It's also completely struck off after a set number of years.
So, if you've not paid your entire student loan back after a certain amount of time, it's completely forgotten about. The government just, simply, gives it up.
Examples Of UK Student Loans That Don't Apply
The vast majority (in excess of 90%) of students studying at higher education will receive the funding from the government as discussed above.
In this instance there may be other financial support available such as grants, however you may also have to consider taking out a student loan for studying with your bank.
This will fund the cost of education alongside your living expenses during this time.
This is where the UK and US further education systems begin to align.
At this point, you'll want to consider whether the financial impact it's likely to be regained and worthwhile.
You'll also want to look at your funding options and begin following Dave Ramsey's student loan advice more closely.
An, of course, this advice does not apply to any student overdrafts you choose to get from your bank while studying.
While these can help assist you in living expenses, they will require paying back and may eventually incur interest and can affect your credit score.
Student Loan Advice In The UK
So, if you're looking for advice on whether or not to pay back your student loan, even pay for your University course in cash or whether or not you should overpay on your student loan when in the UK.
It goes over what I've said in much more details, with real figures and covers both type one and type two student loans.